When a wrongdoer causes injury, he must pay the victim’s hospital bills. If the victim happens to have insurance, the insurance company will often settle those bills before trial. Should the wrongdoer be required to pay the victim for the full amount of the hospital bills? Or only the amount the insurer paid to settle the bills? That was the issue argued today before the California Supreme Court, in Howell v. Hamilton Meats.

The question is a difficult one. Plaintiffs note that, under the collateral source rule, the one who caused the injury shouldn’t benefit simply because the person he injured maintains insurance. On the other hand, defendants argue that they shouldn’t have to pay for medical bills for which the victim was never on the hook. 

The Court’s decision is due in 90 days.

Here are some of the questions that the justices asked and the answers that the lawyers gave. (I’ve paraphrased liberally.)

To the Defense (Represented by Mr. Tyson and Mr. Olsen):

Q: Isn’t the part of the bill that a hospital writes-off for the insurer properly included as “damages” that that the injured party has suffered?

A: No, because the hospital agreed with the health care insurer to write off those amounts before the victim ever arrived at the hospital. Because the victim never incurred those amounts in the first place, they aren’t “damages.”

Q: Why should victims who have never paid premiums and who are thus uninsured be entitled to recover the full amount of their medical bills, while those who have shelled out for insurance for their whole lives recover less? It seems like we’d be treating the uninsured victim better than victims who are insured, no?  Isn’t that the reason for the collateral source rule, to make sure people aren’t penalized for having insurance?  

A:  Were the Court to limit recovery to the amount of the medical bills that were actually paid, it would not be penalizing people for having insurance. The person who has insurance never had to worry about paying his medical bills. That benefit is preserved. 

Q: Wouldn’t allowing the wrongdoer to get off paying less than the full amount of the bills when the victim has insurance be a windfall to the wrongdoer? Wouldn’t he be getting a benefit that the victim, not the wrongdoer, paid for?

A: There would be no windfall because the wrongdoer is in each case paying the actual amount for which the victim is responsible to pay. No more, no less.

To the plaintiff (Represented by Mr. Simms):

Q:  A plaintiff can recover only “damages suffered.” That means harm to plaintiff. If the plaintiff is not required to pay the full amount of the bills, because insurance negotiates them down, how can you say the plaintiff has suffered damages in the full amount of the bill?

A: The plaintiff signs a contract when he walks in the hospital to pay the full amount of the bills. The fact that his insurer later pays less than the full amount to settle the bills doesn’t mean the plaintiff never incurred them. 

Q: But if the plaintiff doesn’t actually come out of pocket to pay them, how is that damages under the Civil Code?

A: When an injured party files bankruptcy, he is no longer obligated to repay the bills, either. But we don’t let the wrongdoer off the hook in that case. Why should we here?

Q: Why should plaintiff be allowed to collect and keep the amount that the hospital has written off due to its agreement with the insurer? Isn’t that a windfall to the plaintiff?

A: There is no evidence in the record that the injured party will keep the amounts written off if that amount is awarded as damages. The insurer may still have a right of reimbursement and the health care provider may have a lien against the recovery.

 Update: Supreme Court Decides:Interview with Gary Simms